Saturday, November 06, 2010

Under the Ontario Employment Standards Act(ESA), an employer who dismisses an employee without cause must give him or her notice of termination or pay in lieu thereof calculated on the basis of years of service (see sections 54, 57, and 61). As a practical matter, most employers choose to give an employee "termination pay" as opposed to "notice of termination."

The maximum termination pay an employee is entitled to under the Act is 8 weeks, for 8 years or more of service.

In addition to termination pay, certain classes of employees are also entitled to severance pay, the other major entitlement given employees terminated without cause under the Act (see section 64). The maximum severance pay an employee is entitled to under the Act is 26 weeks, for 26 years or more of service.

Termination pay is different and distinct from severance pay and the fact that she received an additonal week of termination pay does not permit the employer to reduce her entitlement to six weeks severance pay.

What this means is that the maximum an employee can receive in severance pay and termination pay is 34 weeks of salary, which works out to be 8 weeks of termination pay and 26 weeks of severance pay.

The Act does not permit an employer to set-off or make deductions from "termination pay" or "severance pay," regardless of the circumstances, where an employee has been dismissed without cause.

In Suzanne Lebel, the employer mistakenly paid the employee it terminated without cause an extra week of "termination pay". While the Board ruled that this could not reduce the employee's severance entitlement, it did rule in favour of the employer that the fact that such over-payment was characterized as "termination pay" did not mean it could not qualify as part of the severance payment required to be made by it under the Act:

The fact that the employer referred to the extra week as “termination pay” does not, in all the circumstance The fact that the employer referred to the extra week as “termination pay” does not, in all the circumstances of this case, make the payment “termination pay” under section 61 of the Act. If that were the case, then it would mean that if a employer made a payment to a terminated employee but then failed to accurately or precisely identify the payment(s) as termination pay and/or severance pay under the Act the employer could be obligated to make an additional payment to satisfy its obligations under Part XV of the Act.

Accordingly, the fact that the employer refers to a payment as "severance pay" or "termination pay" may be inconsequential where the employer has made the payment in good faith and for the purpose of paying an employee his or her termination pay and severance pay entitlements.

Employees also have other specific statutory entitlements under the Act upon termination, including the right to payment of outstanding vacation pay and overtime pay.

Severance and termination pay reflect only the statutory minimum entitlements of employees who are dismissed without cause. Employees who are wrongfully dismissed may have additional entitlements at common law, over and above these ESA entitlements.

Entitlements in wrongful dismissal claims can be as much as one month's salary per year of service (generally, with a soft cap of 24 months), subject to credit to the employer for amounts already paid under Employment Standards legislation.

If you believe you have been terminated by your employer without cause, seek legal advice as to your specific entitlements and rights under the ESA and at common law.

The Ontario Human Rights Tribunal has ordered National Money Mart Company to pay $30,000 in compensation to a former, one-year employee of the company who had been subjected to ongoing, serious sexual harassment by her workplace supervisor.

With the Ontario Court of Appeal's June 25, 2009 ruling in Slepenkova v. Ivanov, it is now clear that the nearly-universal pronouncements by management lawyers as to the death of Wallace damages after Honda and Keays may have been a bit premature.

In Slepenkova, the Ontario appellate court upheld a two-month notice extension for an employer's bad faith termination, even though no evidence was led at trial as to the specific damages the employee directly incurred as a result of the bad faith. This appeared to place the trial Judge's decision at odds with the new Wallace test set out in Honda.

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Wise Law Blogfeatures timely articles on legal developments in Canada and the United States, along with commentary on Canadian politics, American politics, technology and noteworthy current affairs.

Launched on April 5, 2005, Wise Law Blog also highlights key decisions of Canadian courts, with focus on Ontario Family Law, Ontario Employment Law and other areas of interest.

Garry J. Wise is primary contributor to Wise Law Blog. He is a Canadian litigation lawyer who practices with Wise Law Office,Toronto. He is a graduate of Osgoode Hall Law School and was called to the Ontario Bar in 1986.

Garry's colleagues at Wise Law Office, as well as occasional guest bloggers, also contribute to Wise Law Blog.

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